Cash is rapidly becoming obsolete in China. What could possibly replace it? QR code based mobile payment solutions, like those run by Alipay-Alibaba and WeChat-Tencent.

These QR based solutions have proven to be faster than cash, with less hassle yet at the same time just as valid. In China, you can pay via QR code at almost every retail outlet, from high end luxury stores to street butcher shops. The market for China’s mobile payments is set to reach 55 trillion RMB in 2017 from 38.5 trillion RMB in 2016, according to iResearch.

How Are These Payment Solutions Expanding?

Chinese tourists are known as the most avid spender around whilst on their travels. According to the World Tourism Organisation, the 135 million chinese citizens who travelled abroad spent $261 billion in 2016 between them. Alibaba & Tencent are tapping into this market segment in order to expand their global reach.

The most popular tourist destinations for the chinese are Hong Kong, Korea, Japan and Thailand. Unsurprisingly, these are also the areas outside of China where Alipay has the most active usage.

Both companies are partnering up with local firms and promoting themselves as a commercial payment solution. These partnerships are most commonly those which are popular with tourists, such as:

Businesses in scenic spots

Restaurants

Duty free shops

Convenience stores

Another strategy that Alibaba are using is to invest in local fintechs and ewallet startups overseas. These have included

By investing in these firms, synergy is created by sharing technology, data, users and consumption scenarios. Alibaba sees these investments and efforts as a way to develop & globalise the entire Ant Financial ecosytem, the financial arm of Alibaba, of which Alipay is just one segment. They expect their within 4 years, half of their userbase will come from outside of China.

Tencent have also been investing abroad in australian companies like Royal Pay and Airwallex, two cross-border payment services.
The plan for both tencent and Alibaba is to gain a bigger share of the tourist market first. The second phase of their globalisation will be to open up their local wallets and enable peer-to-peer transactions within the local overseas economies.

The investment process in however quite slow in most places. Tencent has a local wallet up and running already in South Africa. They have managed this due to the heavy investment in Tencent from Naspers, a multinational internet and media group based in Capetown. They have also had success in Hong Kong due to it’s close proximity to China. Other challenges however, have posed many challenges.

The same goes for Alibaba, which may be opposed by local banking systems. They have successfully disrupted the traditional banking system in China, which means that they could be seen as a competitor for local banking systems in overseas markets.

How Has The Mobile Payments Market Expanded So Rapidly In China?

China’s mobile payments surge can be attributed to

High smartphone penetration

A boom in O2O apps

Wide network coverage

China also has the infrastructure in place to support the manny O2O features from the likes of WeChat. Many overseas users of the app have complained that the international version is a very stripped back version of the Chinese original. This is because Tencent has struggled to negotiate new partners in each country. In addition, the underdeveloped nature of many regions, such as Southeast Asia, meant that many features were simply impossible to implement.

The tech ecosystem in Southeast and East Asia is very similar to that of China 10 years ago, making it the first port of call for Chinese internet companies looking to expand. The promotion of mobile payment solutions by AliPay & WeChat have encouraged the construction of new infrastructure to accelerate in these regions.

WeChat Pay was brought to Europe in 2017, 2 years after Alipay. Both firms partnered with local PSPs such as First Data and CITCON. You can also pay with WeChat and Alipay in North America in places like Caesars Palace Casino is Las Vegas, the Asia Art Museum in San Francisco and the Pacific Gateway in California.

Although markets like North America, Europe & Australia have solid mobile payment foundations through technology like credit cards and digital currencies, there is still potential for the likes of Alipay and WeChat. This is because smartphone based payments generate huge amounts of invaluable data on user habits and location.